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On the morning of Dec. 7, 1941, Joseph P. McDonald manned the switchboard at Fort Shafter in Hawaii when he received the alarming message that radar had detected a large number of planes approaching from the north, heading fast for Oahu.
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JUDGE Firefighters unionpresident “Somebody is going to pay the retirees their back pay. Whether it comes from the pension fund or the city … that’s an argument the city has to have with the pension board.”

The Scranton firefighters pension fund is so financially distressed that it will not be able to pay out millions of dollars owed to retired firefighters from a $21 million back pay award, the attorney for the city’s pension boards said Wednesday.

Attorney Larry Durkin said an analysis recently conducted by the pension’s actuary, Randee Sekol of Beyer-Barber, shows the firefighters’ pension fund would become financially unsound if it paid out the roughly $3.5 million to $5.25 million its retirees are owed. The city code that governs Scranton precludes the city from increasing pension payments if it would cause the fund to become unsound.

Mr. Sekol reviewed only the firefighters pension fund. He has not yet done a review of the police pension fund to determine its actuarial soundness.

Mr. Durkin said there’s no question retired firefighters are owed the money. The issue is the fund cannot afford to pay it.

“Until the fund is actuarially sound, my view is state law prohibits paying out the money,” Mr. Durkin told members of the firefighters pension board Wednesday.

He based his opinion on a section of the city code that states increases in pensions “shall not be granted unless the police or firemen’s pension systems are actuarially sound and able to maintain the increase and allowances to retired members.”

John Judge, president of the firefighters union, disagrees with Mr. Durkin’s interpretation of the section. Regardless, the city is obligated to pay the retired firefighters. He vowed the union will take “whatever steps are necessary” to protect retirees’ interests.

“Somebody is going to pay the retirees their back pay. Whether it comes form the pension fund or the city ... that’s an argument the city has to have with the pension board,” he said.

It’s estimated the retirees are owed $6.9 million to $10.5 million as a consequence of the 2011 state Supreme Court ruling that awarded the active officers and firefighters $21 million in back pay. The retirees are owed the money, the cost of which would be split equally between the police and firefighters pension funds, because they are entitled to a percentage of any pay increase given to active members.

The retirees would not be entitled to the money until the active members are paid. It is not known when that will happen as the city continues to search for funding sources.

The city’s firefighters and police pension funds have been severely distressed for years, with the firefighters fund in the worst shape. As of Dec. 31, 2012, the firefighters fund had assets of $15.8 million and liabilities of $94.6 million, for a deficit of $78.9 million, according to figures from the Public Employee Retirement Commission. That equates to a funding ratio of 16.7. A pension plan is considered severely distressed if it has a ratio of 50 or less.

Mr. Sekol’s report concluded the fund would not be able to absorb the multimillion-dollar increase in liabilities and remain financially sound. He based that opinion, in part, on the fact the fund’s deficit has continued to grow, even though the plan’s investments have performed above expected levels the past two years.

“By every other measure we have identified, this plan would not be considered to be actuarially sound,” Mr. Sekol wrote.

Contact the writer: tbesecker@timesshamrock.com

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